WHAT IMPACTS DID CRYPTO’S PLUNGE HAVE ON THE NFT MARKETPLACE?
After a period of enormous success in 2021, the global financial market in general, and the Crypto market in particular, saw a period of downturn in the first two quarters of 2022. The NFT marketplace has been impacted as a result of this issue. Let’s find out the effects that the NFT marketplace has suffered due to the plunge of the Crypto market in the article.
THE CRYPTO PLUNGE IN 2 QUARTERS OF 2022
Due to the plunge of Crypto, investors had to go through a time of turmoil at the start of 2022.
According to CoinDesk data, Bitcoin peaked at roughly $68,000 late last year, but its price has since plunged 50% as the cryptocurrency’s decline continues. Meanwhile, some analysts have predicted that Bitcoin will bottom out this year at around $14,000, roughly 80% below its all-time high.
Not only has Bitcoin lost about 60% from its all-time high, but so has Ethereum, the world’s second-largest cryptocurrency.
This drop has also affected other crypto companies. Coinbase Global (COIN) has lost 12% of its value, Marathon Digital Holdings (MARA) has lost 21%, and Riot Blockchain (RIOT) has lost 16%.
Terra’s value drastically reduced by more than 99% in May when the complicated algorithms it uses to limit volatility failed to keep its exchange rate with the US dollar constant.
“I think you can bottom in crypto much quicker than you can in traditional markets,” said Joseph Hickey, global head of trading at BlockFi.
According to the Wall Street Journal, Bitcoin continued to fall in the first months of 2022 due to pressure from stock price volatility and the Fed’s predicted tightening of monetary policy.
This decrease has been compounded by China’s crackdown on the crypto markets. Following the announcement that all cryptocurrency transactions are illegal, China’s banks have been asked to stop supporting cryptocurrency transactions and ban digital currencies. This ruling has had a significant impact on the global crypto market.
Furthermore, some investors have lost faith in the crypto market because of the global economic pressures brought on by Russia’s invasion of Ukraine.
The situation got problematic as investors became increasingly concerned that their high-risk digital assets could lead to a downturn in the economy. This also results in a negative trend in stock market investment.
HOW HAS THE NFT MARKETPLACE BEEN AFFECTED BY THE CRYPTO PLUNGE?
The recent drop in the value of the cryptocurrency has had a huge impact on the NFT marketplace.
Many NFT holders recognize that their assets have been severely devalued due to the significant drop in Crypto pricing. NFT marketplace’s activities decreased from February 2022 to mid-March 2022, according to blockchain research firm Chainalysis. As reported by NonFungible, the average number of transactions per week is only 19,000, down 92% from the peak of 225,000 in September 2021.
Besides, from 119,000 wallets in November of last year, the number of active wallets on the NFT marketplace has decreased to abound 14,000 (down 88%).
Daily NFT trading volume plunged 80% to around $50 million in March, as stated in data from the OpenSea exchange, just a month after reaching a record high of $248 million in February.
According to Google Trends, the number of searches for the keyword NFT peaked in January but has subsequently decreased by around 80%.
Owners of over 100 CryptoPunks tokens with a market value of $30 million have withdrawn from a Sotheby’s auction. Last weekend, when the average price on OpenSea sharply reduced from 17 ether to less than 8 ether, a Discord member said he bought a Cool cat. Since May 4, the floor price of a popular collection based on the Azuki anime has decreased from 30.5 ETH to 15 ETH (more than 50% off).
According to Estavi, the failure of an auction does not imply a saturated NFT market, but rather “a normal fluctuation that could occur in any market.”
SIGNS OF FLOURISHING IN THE NFT MARKET
Bitcoin’s value has climbed by 5.44% to over 31,000 USD/BTC as of the morning of June 8, 2022. As a result, the NFT market is regaining its footing.
According to Chainalysis statistics, the NFT marketplace began to revive in mid-April thanks to the launch of Bored Ape Yacht Club’s metaverse initiative. In addition, the number of unique addresses that have purchased or sold NFTs have risen.
The number of active NFT buyers and sellers continues to rise despite the changes in trading volume during this time. In the second quarter of 2022, from April 1 to May 1, 491,000 addresses traded NFT, keeping the NFT marketplace on track and continuing its quarterly growth trend in the number of participants.
According to data from the cryptocurrency market CryptoCompare, the entire value of capital inflows into crypto exchange-traded funds has increased. In particular, the average weekly cash flow reached 66.5 million USD, a significant increase over the previous April crisis, when cash was outflowing at a rate of 49.6 million dollars.
It is apparent that NFT is a global movement that is rapidly gaining traction. As a result, the link between the crypto world and the lives and work of artists, content creators, and others will become stronger.
In the past, we’ve seen well-known NFT transactions involving foreign artists, as well as fashion and beauty brands becoming more involved in the NFT marketplace. NFT is gaining a lot of attention from the community after a lot of success from famous artists and corporations.
Recently, there was a noteworthy occurrence. The NFTs were discussed and introduced at the 2022 Grammy Awards by music industry experts and famous musicians.
Most notably, Binance and OneOf, two cryptocurrency companies, have signed on as the Grammys’ main sponsors for 2022. G-Eazy, an American rapper, answered Cointelegraph that he is happy and humbled to debut his first NFT collection, “The Geralds,” at Grammy Awards this year.
In addition, 2D and 3D painting artists now have a growing number of options and opportunities for growth instead of only relying on freelance work as before. They can create NFT collections and profit directly from them. Currently, more and more artists are selling their NFT creations, and some of them have received private orders from investors.
It is clear that the crypto market’s decline has had a big impact on the NFT marketplace. On the other hand, some investors regard this as a necessary step back after a time of rapid expansion, and there is a lot of uncertainty about what the future will hold. Keep an eye on Snailhouse’s blog for updates on the NFT and Crypto markets.
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